Pension fund PGGM warns on dangers of social greenwashing

The principal director for responsible investments at PGGM Investments, the investment manager for the €277 billion ($306 billion) Dutch pension fund, has pointed to the continued challenges associated with measuring the social impact of investments, highlighting the reputational dangers of social greenwashing.

“You encounter liberal definitions. There is some inflation in the terms that we want to be very cautious about. You don’t want to overstate [investors’] social contributions,” said Hans Op’t Veld, principal director for responsible investments at the fund.

The dangers of social greenwashing arise in part because of the challenges of accurately measuring the social impact of an investment, he noted.

“Measuring social impact is harder than measuring environmental impact, and many investors are in a pickle,” said Op’t Veld, who is also chair of the markets and members committee of the Sustainable Development Investment Asset Owner Platform (SDI AOP), an investor-led initiative whose investor members represent an AUM of $1.468 trillion. 

EMERGING CHALLENGES

“Particularly in emerging markets, accurate measurement is important,” he said, adding that Asia and other emerging markets provided particular challenges for evaluating the impact of investments that come with a social label.

He noted the challenges of comparing an investment in affordable housing in Europe, with one in the Philippines or the Dominican Republic. If the definition of affordable housing was subsidised housing, that meant investigating what the subsidies were, and what effect they were having, he noted. 

“You have to take into consideration the geography and the population that is being served as well as the accessibility of social solutions. Do they translate into meaningful social impact? This is by no means easy [to measure],” he said.

Op’t Veld said that thematic investments into sectors typically associated with social impact had to be carefully investigated, especially in emerging markets like Asia. “Consider healthcare real estate: is it private hospitals for the rich, or healthcare access to a wider group of people who don’t currently have access to it?” he said.

This presented specific challenges to developing standard social measures, which the AOP is attempting as part of its social taxonomy. Focusing on publicly reported data, the method followed by the AOP, went some way to addressing the problem — but challenges remain, he added.

“The struggle with [developing a] taxonomy is that thresholds might differ from one country to another. So, the way it plays out in different economies might be different,” he noted.

REASONABLE EXPECTATIONS

Fiona Mann, head of listed equities and ESG at Brighter Super, told AsianInvestor that asset owners should be held to reasonable standards in an area where collecting accurate data, especially for smaller funds, was often challenging.

“My belief is that the industry as a whole is making good progress. It can be overwhelming for a smaller fund — smaller investors may not be able to achieve what larger ones can. The important thing is that efforts are being made to move in the right direction.”

In recent months, the social impact of investments in APAC has come under increasing scrutiny.

In December 2022, a report by Hong Kong Watch, a UK-based research group, and the Helena Kennedy Centre for International Justice at Sheffield Hallam University in the UK, suggested that three major stock indices provided by index publisher MSCI included at least 13 companies that have allegedly used forced labour or have profited from China’s construction of internment camps in Xinjiang and its surveillance apparatus in recent years.

Eleven of the companies have subsequently been removed from the indexes.

In January, Michael Wyrsch, chief investment officer and deputy CEO at the $8.2-billion Melbourne-based Vision Super, confirmed to AsianInvestor that his fund is a shareholder in Xinjiang Goldwind, one of the 13 companies named by Hong Kong watch, but said he would not be divesting from the company.

“I think you need to fight, not run, if you really want change. What that means is lobbying government, putting forward resolutions, firing directors and the like. Ultimately though, we need better ways to bring pressure to bear on companies," he said at the time.

Also in January, the New Zealand Superannuation Fund (NZ Super) told AsianInvestor it is continuing to monitor the situation in China, in light of alleged human rights and forced labour abuses.  “We agree that businesses and investors need to take the ‘S’ in ESG seriously, and we do," said a spokesperson for NZ Super.